Losing rail bidders will get $2M each

Sajeev Malaveetil, an expert in government contract accounting, administration and compliance, said stipends are most frequently seen at the state level on major transportation projects.

“It’s not a common practice, and I can’t necessarily think of situations where you see it outside of a major construction or developmental project, but it’s not unprecedented,” said Malaveetil, a director at the Berkeley Research Group in Washington, D.C. “It is used primarily in situations where the procuring party cannot itself identify the specific requirements they are looking for.

“They know what the end result is, but they are looking for different options and design components and technical approaches with the understanding that when they make the final contract award, they may actually adopt some of those facets from one offer into the ultimate contract.”

He added that stipends tend to be used as an enticement in private-sector projects because the money is less restricted.

U-T San Diego requested the California High-Speed Rail Authority and the California Department of Transportation to provide examples of projects that compensated unsuccessful bidders.

The rail authority cited stipends in nine states, including Louisiana, Maryland, Utah and Florida. The lowest was $10,000 and the highest was $1 million.

Caltrans provided one example in which it compensated three unsuccessful bidders $100,000 each for putting together complex proposals for a tunnel project in the San Francisco Bay Area. Spokesman Mark Dinger said the bids came in about $60 million below original estimates for the Caldecott Fourth Bore Project. The tunnel connects Oakland and Orinda through the Berkeley Hills. Other stipends have ranged from $25,000 to $250,000, Dinger said.

“On our design-build projects we offer stipends to offset the cost of the proposals and in order to own the ideas of the unsuccessful proposers,” Dinger said.

Former Caltrans director Will Kempton said stipends were “not uncommon” on large, complicated projects. He said the Bay Bridge project originally received just one bid that came in way over budget. A subsequent round offered a stipend and there were two bidders.

“As a result, the price was better than it was in the first go-round,” Kempton said.

Several major contracting firms contacted by the U-T requested to speak only on background so not to jeopardize their chances of securing the contract for the first stretch of the high-speed line in Fresno and Madera counties. Some said without the cost deferrals they would hesitate to bid on what could amount to a fruitless endeavor.

Aaron Fukuda, a Central Valley civil engineer and activist against the project, said he has serious doubts about the bidder payments saving taxpayer money.

“I understand this is a big project, but the stakes alone should hold the bidders to sharpen their pencils and make it a good bid,” he said.

Looking forward, many observers of the project are watching for the results of the design-build contract, which the rail authority hopes to award in June, as an early indication of whether the estimated $68 billion project cost will hold true or start rising.